Repayment Plan Termination under Section 118 IBC – NCLT on Personal Guarantor Defaults

Case Details: Vineeta Maheshwari vs. Canara Bank Arm Branch [2025] 177 taxmann.com 736 (NCLT - Ahd.)

Judiciary and Counsel Details

• Shammi Khan, Judicial Member
•  Sanjeev Sharma, Technical Member

Facts of the Case

In the instant case, the Financial Creditor filed an application under Section 95 to initiate insolvency resolution process against the Personal Guarantor of the Corporate Debtor. The said application was allowed by the Adjudicating Authority and the applicant was appointed as Resolution Professional. Thereafter, the applicant received a Repayment Plan from the Personal Guarantor.

The creditors approved the said Repayment Plan with 100% majority, which was subsequently approved by the Adjudicating Authority. However, the Personal Guarantor failed to implement the Repayment Plan, as evidenced by default on the first instalment and non-payment of subsequent instalments.

The applicant’s report under Section 118(2) established premature end of the Repayment Plan due to such defaults, and further confirmed that claims of creditors remained partially unsatisfied as of the premature end of the Repayment Plan.

NCLT Held

In view of repeated defaults by the Personal Guarantor and the resolution of the creditor to pursue bankruptcy, the NCLT held that termination of the Repayment Plan under Section 118 was appropriate.

Accordingly, the instant application filed by the applicant to declare premature end of the Repayment Plan and to grant liberty to the sole Financial Creditor to file appropriate application for initiation of bankruptcy against the Personal Guarantor, was allowed.